Is OCEMA’s Terminal Weighing Approach SOLAS VGM compliant?

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The lack of guidelines for shippers about how to comply with the SOLAS VGM regulation as it went into effect on July 1, 2016, led to a number of questions throughout the industry. Where should containers be weighed? How do shippers provide their signatures for these weights without slowing down the supply chain? Still, as of the end of July, many of the 170 countries that have adopted the regulation have not published guidelines.
Clarity Amid Chaos
In an effort to provide clarity, the Agriculture Transportation Coalition (AgTC) discussed a new proposal at their Conference in June. The primary point of the proposal was to establish a unified practice of weighing cargo containers at the terminal during the in-gate process. Since the Intracoastal Agreement Loss rule (which has been in place for 30 years) already requires terminals to weigh containers as they enter terminals for worker safety, the U.S. Coast Guard agreed that this process adhered to the weighing requirements in the SOLAS VGM regulation. In addition, the Ocean Carrier Equipment Management Association (OCEMA), recently declared the Terminal Weighing Approach (TWA) is an industry best practice.
There is no doubt that weighing containers at the terminal provides the most accurate container weight, because the entire container is being weighed at the closest point to being loaded on the ships. In addition, this is far more accurate than weighing the cargo components separately and adding the parts plus the container to arrive at a combined weight. Weighing the entire container at the terminal greatly reduces the chance of human error.
It just makes sense to support OCEMA’s TWA as an industry best practice. However, simply providing a container’s gross mass does not fully comply with the SOLAS VGM requirement. The SOLAS VGM regulation clearly states that the shipper, or a person duly authorized by the shipper, must provide a signature, either physical or electronic, with the container’s gross mass to the carrier – thus verifying that the gross mass is accurate, as well as assuming accountability for that weight. The signature verifying the gross mass is the key difference between the new VGM requirement and the 1994 SOLAS requirement that shippers were to provide the gross weight of containers.
Who Is Accountable?
Since the announcement of OCEMA’s TWA, there has been a variety of opinions within the ocean shipping industry about who is ultimately responsible if a discrepancy in container weights is discovered. Some shippers assume that, by using OCEMA’s TWA, terminals will be liable in case of a weight discrepancy. And of course the terminals do not want to assume this liability. Who would? Another cause of confusion is that some industry “experts” assert that a signature is not required from a shipper when using this approach. However, this assertion is at direct odds with the SOLAS VGM regulation, and it also subjects terminals to liability issues.
In order to secure the signature from shippers, James Newsome, president and CEO, of the South Carolina Ports, proposed that the terminal and the shipper enter an agreement where the terminal will submit VGM on behalf of the shipper, thus taking the responsibility for mis-declared container weights.
Historically, shippers and terminals have never had business relationships. The difficulty and time spent setting up a contractual relationship could slow down the supply chain. Now the question is – how does the industry comply with the VGM requirement without slowing the movement of the cargo.
The Common Sense Approach – VGM Submission via a Secure Online Portal
Trade Tech recommends a “painless” VGM submission process as a best practice where shippers use a cloud-based portal in conjunction with OCEMA’s TWA in order to file a complete VGM declaration.
We see two approaches for capturing both the shipper signature and the terminal weight. In the first case, the portal “orders” a weighing from the terminal. After the in-gate process the terminal transmits the weight back to the portal that automatically completes the VGM declaration and transmits it as a regular VGM declaration to the carrier.
In the second case, shippers create shipment instructions within the portal including the usual VGM responsibility signature. This signature is automatically transmitted to the carrier, demonstrating that the shipper trusts that the stated weight coming from the terminal is true and accurate. The terminal then weighs the container and sends the weight to the carrier through normal means. From there, carriers combine the weight received from the terminal and the electronic signature received from the shipper to form complete VGM declaration. The carrier transmits the terminal weight back to the shipper for record keeping purposes.
With the addition of one of these simple approaches, the VGM requirement can be effectively met without shippers and terminals entering into any kind of legal contractual relation or terminals assuming liability.
While the main goal of this process is to meet the VGM requirement, there are additional benefits for both carriers and shippers. Using this type of online portal solution will lead to fewer booking exceptions for carriers, allowing them to know for certain which booked containers they will receive prior to their arrival at the terminal. As a result, carriers can plan accordingly. In addition, by using a cloud-based portal in combination with OCEMA’s TWA, shippers do not have to be directly involved with weighing the cargo containers and the extra handshake to capture the container weight happens automatically in the background. This also gives shippers full visibility into cargo movement from the first mile, and information flow is streamlined and faster.
The best practice of using OCEMA’s TWA in conjunction Trade Tech’s recommended VGM submission process provides the most accurate container weight and ensures the VGM requirement is met – all without slowing down the supply chain or adding extra manual steps. As the industry learns more about communication, liability, and supply chain issues in the current process for VGM submission, it will become more important that this best practice is adopted throughout the industry to meet the VGM requirement.

Shippers traversing multiple carrier sites to submit SOLAS VGM declarations may be vulnerable to security risks, data errors and unnecessary delays

Many Arrows of Opportunity
Trade Tech recommends shippers to use centralized cloud-based portals, like its Syrinx™ e-Shipping Portal (Syrinx), to submit SOLAS VGM declarations to carriers. Syrinx, which is connected to virtually all carriers, is significantly more efficient than using multiple carrier portals and has the added benefits of increased security and reduced risk of data entry errors. Experience how simple it is here.

 

Since the SOLAS VGM regulation went into effect, many shippers are resorting to carrier portals to submit their VGM declarations. As a result of using this VGM submission method, shippers that work with multiple carriers are required to create multiple logins and manually enter information into multiple carrier websites for each shipment.  In order to check the status of VGM declaration submissions, shippers must login to each carrier website. This time-consuming process continues to reduce productivity as shippers typically use a number of carriers. In addition to the tedious task of entering data into multiple sites, the shipper is more vulnerable to data entry errors as well as their sensitive information being hacked.
Trade Tech co-founder and CEO Bryn Heimbeck says, “It has been shippers’ initial response to use carrier portals to submit their VGM declarations because they’re free. However, there is a real inconvenience of doing business this way. For example, if a shipper does business with 15 carriers, they’re going to suffer from the extensive amount of time and effort it takes to manually enter those declarations for each shipment in 15 different carrier portals. While the carrier portals may not cost money per se, this process costs shippers’ time, which in the end is money. This is why we strongly recommend the use of one centralized, secure cloud-based portal for VGM submissions.”

By using a single, centralized, cloud-based portal that is connected to multiple carriers, such as Syrinx, shippers benefit from the following:

  • One secure login to submit the VGM for all their shipments, regardless of carrier.
  • Ability to check the status of each VGM submission in real-time by only logging into one platform.
  • Increased efficiency and reduced risk of data entry errors by only keying data once.
  • Reduced security risks by having one secure portal and login.
Unique benefits specific to the Trade Tech solution include the system’s robust validation process which, as an example, provides an auto-populate process for trading partner information, ensuring data consistency throughout the supply chain. In addition to VGM submissions, Syrinx has the capability for shippers to submit various security filings, including Automated Manifest System (AMS) filings, Importer Security Filings (ISF), Japan Customs Advance Filing Rules (AFR), Canada Advance Commercial Information (ACI) and Canada eManifest simultaneously, plus Automated Export System (AES) filings. These filings are naturally integrated into a single interface.

Japan, China, U.S. Ports Seen at Highest Catastrophe Risk

Photo: Port of New Orleans.Maersk New OrleansInsurers have studied the high risk from natural disasters occurring at the world’s ports. Similarly they are assessing the higher risk of mis-declared cargo weights on container ships; a potential man-made disaster.

We note that presently

  1. All around the globe, SOLAS VGMs data is being collected incorrectly and non-compliant, if at all.
  2. As the insurance think tanks are doing studies of weight declarations pre-VGM and post-VGM implementation, they will undoubtedly find discrepancies between declared and actual weights.
  3. The Bloomberg article, below,  states that the risk per port is $2 billion, yet the cost of one manmade disaster alone, in Tianjin, exceeded $3 billion and the tragic loss of more than 170 lives.

By Agnel Philip

(Bloomberg) — Ports in Japan, China and the U.S. face the greatest financial risk from natural disasters because of their vulnerable locations and increasing cargo volumes, a risk-management firm said.

Nagoya, Japan, leads all ports with a potential $2.3 billion cost to insurers from a one-in-500-year event because of the threat from earthquakes and windstorms, RMS Inc., a risk-modeling firm, said Monday in a statement. Guangzhou, China, is second at $2 billion, the company said, citing the possibility of wind-related losses and the dangers involving petroleum products and autos. RMS said satellite images and analysis of cargo types and storage methods helped modernize risk assessments.

“Outdated techniques and incomplete data have obscured many high-risk locations,” Chris Folkman, director of product management at RMS, said in the statement. “The industry needs to cease its guessing game when determining catastrophe risk and port accumulations.”

Tianjin Disaster

The report was released a year after the Tianjin port explosion in China, a man-made disaster that led to more than $3 billion in claims after damaging property, disrupting supply chains and killing more than 170 people. RMS’s analysis, which also considers the amount of time cargo stays in port, found that the increased use of standardized shipping containers increased the amount of goods exposed to damage. Ships and ports have grown bigger to accommodate the containers.

Takahiro Ono, risk management supervisor at Nagoya Port Authority, said planning for possible catastrophes is a priority.

‘Safe and Secure’

“We’ve been preparing for emergencies and disaster on a daily basis to ensure a safe and secure port,” he said.

U.S. ports at the Gulf of Mexico held six of the top 10 spots, led by Plaquemines and New Orleans in Louisiana, because of their exposure to hurricanes. The country’s other locations on the list are Pascagoula, Mississippi; Beaumont, Texas; Baton Rouge, Louisiana; and Houston.

Catastrophe costs tied to wildfires in the oil-producing region of Canada and storms in the U.S. cut profits at insurers including Chubb Ltd. and XL Group Ltd. this year. Travelers Cos. said second-quarter net income fell to its lowest since 2012 in part because of the fires.

© 2016 Bloomberg L.P

Could VGM become a catalyst for industry change?

Tipping PointSOLAS VGM data underpins most shipping documents. In a radical view, Trade Tech argues that using cloud software to automate VGM data capture and hand-off, can benefit other logistics processes to the point of becoming transformational. Freight forwarders are transforming into a hybrid of transportation- and IT service providers.

The solution whitepaper “SOLAS VGM – The Tipping Point for Shipping Industry Transformation” outlines how moving to a cloud-based approach will:
• Accelerate supply chain information flows and eliminate information bottlenecks that halt cargo movements.
• Reach all involved parties, globally, with familiar and easy to use interfaces that are instantly available and easily adopted.
• Ensure up to date solutions that are compliant and meet industry requirements.
• Enable shippers to focus on shipment planning, exception monitoring and controlling while the actual shipment execution is completely automated and instrumented – in effect changing the way shippers work.
• Drive standardization of supply chain data across the industry.